A recent partnership between CheckFree Investment Services and Northfield Information Services, Inc. will enable wrap account managers, who manage their portfolios with CheckFree's APL WRAP, to "become more tax efficient from a trading perspective," James Waller, investment services senior vice president at CheckFree, says.
Under this partnership, wrap account managers using CheckFree's APL WRAP can plug account and portfolio data into the Northfield optimization software. After running the optimizer, users receive tax-efficient trade recommendations that they can upload into APL WRAP's order management system.
"Depending on how tax tolerant you are," Chris Amorello, vice president at Northfield, explains, "the output is an optimized portfolio that takes into account the capital gains and transaction costs of moving from point A to point B with these new positions."
Amorello explains that the product, which was programmed using C++ in-house, is installed using a CD-ROM and is compatible with most money managers' operating systems, such as Windows NT, UNIX and Linux through a data interface.
Using complex algorithms, the system is programmed to offer suggestions to money managers based on their preconfigured list of preferred securities. Data from each optimized portfolio can be saved in a Microsoft Excel or other database file.
Currently, the partners have one money manger client, 1838 Investment Advisors Inc., who has been experimenting with Northfield's system and APL WRAP during the last three years. According to 1838's managing director Joseph Doyle, 1838 successfully runs both systems through one interface program called TaxSmart, constructed by 1838 to fully integrate the two systems.
While users can use APL WRAP and the optimizer easily without such an interface, Amorello noted that the ultimate goal is to fully integrate Northfield's system as a tool within APL WRAP. In this manner, the user can remain inside the portfolio management system and perform trade recommendations directly. Waller and Amorello say they are currently seeking more institutional money managers and wrap managers to take advantage of the new arrangement.